Xi Follows in Deng's Steps in China

Until last week Chinas incoming leader Xi Jinping
hadnt revealed much about his policies or what he stood
for. But Xi, who was selected by Chinas Communist Party
as general secretary in November and is set to succeed
President Hu Jintao in March, made his priorities abundantly
clear when he spoke in public for the first time during his
inaugural trip as head of the ruling party. His speeches before
local leaders in Shenzhen, Chinas first special economic
zone, took place during his first stop on a five-day visit to
four cities in Guangdong province that ended on Saturday. The
visit retraced former paramount leader Deng Xiaopings
trip to the South in 1992, which Deng used as a
political pulpit from which to accelerate market reforms that
led to 20 years of double-digit growth.

There will be no stop in reform, no stop in opening
up, Chinas official Xinhua News Agency quoted Xi as
saying in his many speeches to local leaders. Xinhua says Xi
had reiterated during the trip that reform and opening up
was a great awakening in the partys history.
Xis trip comes amidst deep concerns among the public that
powerful and entrenched vested interests ­
particularly state-owned conglomerates and self-enriching
bureaucrats  had highjacked Chinas economic
reforms.

Though state-owned firms contribute to just 35 percent of
Chinas economy, they control nearly 80 percent of the
financial resources, says Jing Ulrich, chairman of global
markets, China, at J.P. Morgan.

Economic reforms, particularly of financial markets, stalled
under the previous leadership. Though bureaucrats have launched
a raft of new efforts in recent months, investors fear that the
momentum will stall again.

The latest attempts at reform, including interest rate
liberalization, increased lending to private enterprises and
more market access for foreign investors, seek to direct more
financial resources to the private sector.

Upon his election on November 14 in Beijing, the 18th Party
Congress issued a declaration that there will be a new
order of mobilization for deepening reforms and opening
up. Xi said during his visit to Shenzhen last week that he
chose Guangdong, which abuts the former British colony Hong
Kong, because he wanted to conduct an onsite
retrospection of the history of reform and opening up and
declare the resolve to press ahead with that policy.
Xis inaugural trip as leader contrasts with that of his
predecessor. Upon becoming general secretary in 2002, Hu Jintao
visited Xi Bai Po, a village in Hebei province that was the
former headquarters of the Peoples Liberation Army. In
1948, Chairman Mao Zedong made a famous speech there, rallying
the troops before their ultimate victory over the
pro-capitalist ruling Kuomintang in 1949.

Unlike Hu, the son of tea merchants, Xi doesnt need to
prove his red credentials. Xis father, Xi
Zhongxun was a revolutionary and former vice premier, and most
importantly, he helped Deng Xiaoping design and launch special
economic zones, chief among them Shenzhen, where China began
its initial experiments in capitalism in 1992. But Xi also
acknowledged that the countrys reforms had entered a
difficult phase, which would require greater political
courage and wisdom to deepen reform in key areas.

Pro-reform elements in the ruling circle are also pushing
for administrative and political change that would check
official corruption. As much as a fifth of Chinas gross
domestic product of $7 trillion is estimated to go to officials
in government and executives in state-owned enterprises through
bribery and kickbacks. A recent investigation into former
Chongqing party chief Bo Xilai revealed that he and his family
may have funneled more than $1 billion out of China. The
fastest way to make quick money in China is to become a
government official, says a Beijing-based businessman who
asked not to be identified by name.

Xi recently named former investment banker and vice premier
Wang Qishan to head up the partys top disciplinary body
in a fight against official corruption.

Whether Xi can push through aggressive reforms is
anyones guess. Without an independent media and
political opposition, it is literally impossible to initiate
aggressive reforms in China, says a veteran foreign
investment banker based in Beijing. Xi Jinping has his
work cut out for him.

Though he has been in office for less than a month, there
are signs that Xi is beginning to shake up the bureaucracy.
Last week, state media announced that Li Chuncheng, the deputy
party chief of Sichuan province, had been sacked for
corruption. Li, 56, became the first ministerial-level official
to be investigated following the Partys national congress
last month. He is alleged to have offered bribes for promotion,
selling official positions to incompetent candidates, and
making his wife head of Chengdus Red Cross after it
received huge sums of donations following the 2008 Sichuan
earthquake.Whether you believe Xis anti-corruption
campaign is sincere or just public relations, there is no
question that he has already begun to take solid steps,
says Guan Anping, a Beijing-based securities lawyer. He
will go after corrupt officials and vested interests in the
state-owned conglomerates. He knows the public at large is
angry, so watch out for fireworks in the coming months. More
heads will roll.